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Port authority

26 November 2015 By Quentin Webb

The home team has the edge in Australia’s infrastructure bid battle. An A$9 billion ($6.5 billion) cash-and-shares bid by Brookfield for Australia’s Asciano has hit serious opposition from the country’s competition regulator. The Canadian giant may yet salvage its agreed takeover of the ports and rail group. But local gatecrasher Qube, which is already examining Asciano’s books alongside its own partners, now looks the most likely winner.

The Australian Competition and Consumer Commission worries a Brookfield takeover will hurt competition for rail haulage in Western Australia and Queensland, since Asciano’s trains run on Brookfield’s rails in the western state and deliver coal to its prospective owner’s terminal on the east coast. The watchdog has now, sternly, refused to accept “behavioural” promises to fix the situation.

Brookfield says it is thinking through its options, including “structural” solutions – such as divestments. But it’s not clear what answer would both satisfy the ACCC and maintain the economic value of the deal.

With just Brookfield’s firm offer in hand, Asciano’s board has sensibly continued to recommend that deal while working with the bidder. But it has also given Qube access to its data room. This should allow the interloper to reach the point where it can make its own formal bid, which would have fewer antitrust problems.

By mid-afternoon in Sydney on Nov. 26, Asciano shares were flat at A$8.75, or just below the A$8.80 level at which both bidders raided the market to snatch near 20-percent stakes. So investors reckon there is at least some tension left in this battle, and one of the two will eventually clinch a deal. At this point, however, Qube looks to have moved into the lead.


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